Saudi Arabia hiked the price of its flagship crude to its main buyers in Asia for next month after Opec+ agreed to keep current supply cuts in place and the Middle Eastern oil market shows signs of strengthening.   

State-owned Saudi Aramco raised the official selling price of Arab Light crude for Asia to a premium of US$2 a barrel to the regional benchmark for May sales, according to a price list seen by Bloomberg. 

The monthly gain of 30 US cents is the second consecutive increase for the grade to the region. The company had been expected to raise it by 10 US cents, according to a survey of refiners and traders.

Middle Eastern crude markets are looking increasingly tight, with key gauges rallying since the start of the month. A panel of the Organization of Petroleum Exporting Countries and its partners this week also recommended keeping the group’s current output-cut policy in place through June. In addition, geopolitical risk linked to war and attacks on shipping have contributed to crude futures rising to the highest prices this year, near US$90 a barrel.

The supply cuts are helping to squeeze the market for relatively dense and sulfurous crude, which makes up a majority of grades pumped from the Persian Gulf. The United Arab Emirates is also using more volumes of its Upper Zakum grade – a competitor to Saudi Arab Light – for its Ruwais refinery, and the decline in exports has taken Asian oil traders by surprise.

Many oil analysts expect global oil markets to tighten further this year. Saudi Arabia, Opec’s largest producer, will be key in deciding when it and partners can increase production without hurting prices. BLOOMBERG

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